Make the Most of a Pre-Settlement Property Inspection

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All that stands between you and the property settlement is the final inspection. Here’s what to expect.

When the time comes around for the final walk-through of the property you’re about to own, should you feel anxious or relieved? Buyers often wonder whether the inspection is just a formality at the end of the selling process or a game-changer that could have serious ramifications for the settlement date.

The bottom line is that the final inspection is important, and worth attending. However, be prepared to lower your expectations about what you can achieve. Settlement delays usually only occur when the property is uninhabitable. So even if you think the house is unclean, appliances are broken, or there are scratches on the floor you’ve not seen before, the settlement will usually still proceed.

What you can expect is for the property to be in the same condition as it was when you exchanged contracts, allowing for fair wear and tear. You might think this means the property should be empty, clean and pristine, but there is no obligation for the vendor to clean the property thoroughly. Steam cleaning the carpet, washing the windows and wiping away the dust would be a welcoming gift, but it doesn’t always happen.

If you find problems at the final inspection, such as holes in walls or appliances not working, the vendor has the right to protest that this is acceptable wear and tear. It’s difficult to mount a compelling counter argument unless you’ve taken these critical steps in the lead up to the final inspection.

Before exchanging contracts of sale, you conducted a thorough inspection of the property and tested the condition and working order of all appliances and fixtures. You also organised for a pre-purchase home inspection with a licensed builder or surveyor.

You checked the contract of sale carefully to ensure your solicitor has listed each item individually with a description of its condition.

Take the first step

It's during the first few inspections of the property that you need to get actively involved in checking and recording every little detail. A helpful tip is to activate the date-stamp on your camera and take photographs as you go.

Move from room to room inspecting all the fixtures and appliances: check that every power point, light and exhaust fan works; run water in the taps; flush the toilets; turn on the oven and dishwasher; try the door handles; check for curtains and functioning windows and doors; look for holes behind furniture in walls or wardrobes. Keep going until you’ve checked every conceivable detail.

Examine what’s written in the contract

Read your contract of sale from top to bottom. Be sure the items you checked and tested at the initial inspection are listed, with an accompanying description of their condition or working order.

You may also want to discuss with your solicitor the option of including special conditions in the contract, such as specifying that you will withhold funds from settlement if there are any issues with the state of the property.

If you notice something amiss at the final inspection, you have the right to complain that the property is not in the same condition as it was when you exchanged contracts. The time-stamped photos and inclusions listed in the contract are powerful incentives for the vendor to fix these issues.

Not including these details in the contract may weaken your position. It gives the vendor an opportunity to argue that the property was in this condition when you agreed to buy it.

Tip! Take out home insurance as soon as the sales contract is signed. Depending on your state or territory, the risk of damage to the property may pass to the buyer on exchange of contracts.

Pick your battles

When it comes to finding problems at the final inspection, knowing how to pick your battles is a skill worth mastering. There are costs involved with legally pursuing the vendor, so you may decide it’s cheaper and simpler to fix the problems yourself.

Legal practices and procedures vary from state to state, so your solicitor is the best source of knowledge on how to proceed. You may have the option to withhold funds, in Trust, to be released once the vendor has resolved the problem. Another option might be to agree with the vendor on a price adjustment to come out of settlement funds.

Keep in mind that if the damage was there at the first inspection, it will probably still be there at the final inspection unless the contract includes a special condition requesting its repair.

**The information on this article contains general information and does not take into account your personal objectives, financial situation or needs. If you require further information don’t hesitate to contact the branch directly.